She said the move from RPI to CPI for increases to pensions in payment and the average 3% rise in pension contributions had been introduced without consultation.
Carberry said the contribution increases would drive up opt out rates and reduce trust in the scheme: “The government is assuming a 1% increase in opt outs across all the schemes, whereas the Local Government Pension Scheme is predicting 40%.”
The CPI change and other changes already introduced would reduce the value of public sector workers’ benefits by 25% over an individual’s retirement and the two year wage freeze and the cuts in workforce numbers would provide the government with further cost savings, she said.
She disputed Lord Hutton’s assertion that the chart in his final report showing that public sector pensions were sustainable going forward included the effects of the reforms proposed in his 2010 report. That chart showed the cost of public sector pensions as a percentage of GDP actually falling over the coming decades.
Instituted of Directors spokesman Malcolm Small said these figures were no longer accurate because relied on more positive growth assumptions than exist today.
Carberry said: “The chart in the interim report which shows public sector pensions accounting for a declining part of GDP assumes the 2005 reforms and shows that the costs were going to decline before he proposed the rise in contribution levels.”
She said the TUC would be launching a legal challenge to the CPI change on 25 October and predicted that the TUC day of action against the reforms would receive widespread public sector union support.
Carberry’s comments met with criticism from adviser delegates at the Corporate Adviser summit, who said defined benefit pensions were unsustainable whether in the public or private sector, and argued it was not fair that public sector workers should have their retirement incomes guaranteed while private sector workers were largely in riskier DC schemes. She responded by questioning how reducing the security of public sector workers would help the overall retirement provision of the population as a whole.
